Crude oil braced for OPEC+ decision, say market watchers

November 28/ 11:40

Moscow. The plunge of the price of crude oil that has lost over 30% since the beginning of October, most likely is about to stop, experts polled by TASS assume. The upcoming meeting of OPEC+ nations in Vienna in early December will determine the price dynamics in the near future. The market expects a decision on production cap to follow the meeting to avoid the 2014 scenario.

The beginning of autumn was marked by volatility on the oil market. Having reached the highest level over four years of almost $86 per barrel by early October, the price of oil plunged sharply, breaching the $60 per barrel mark on November 26.

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"The oil price was rising as the market was afraid of deficit anticipating sanctions, but since it never happened investors started fixing long positions. By doing so, they started a plunge in the price," Finam’s analyst Alexei Kalachev explained,told TASS.

The price correction was also connected with ambiguous signals from the side of OPEC+, Raiffeisenbank’s Andrey Polischuk adds. "First OPEC+ spoke about shifting to limiting and even reducing output. However, no agreements were reached at the meeting on November 11, and we heard no specifics," he said.

Moreover, anti-Iran sanctions turned out not so strict as expected earlier, experts note, as the US virtually allowed Tehran to export crude to its biggest buyers, India and China, as well as other Asian and European countries.

They expect the decision to be made by OPEC+ nations to be the key focus of the market now. "Currently the market is expecting the OPEC+ meeting in Vienna (on December 6-7)," Polischuk said.

Experts also believe that the principle decision on the oil production policy may be taken prior to the Vienna meeting - at the G20 meeting in Argentina. As reported earlier Russian President Vladimir Putin can meet with Saudi Crown Prince Mohammed bin Salman Al Saud there to discuss issues of oil cooperation. Energy ministers of the two countries will also attend the summit.

"If an agreement is reached on basic principles in Argentine, one can expect a decision on (production) cut in Vienna," Kalachev said, adding that otherwise "the preliminary work will only start in December."